Malaysia’s conventional and Islamic banks as well as the overall financial sector have exposure to major sources of greenhouse gas through the financing of four sectors that account for 83% of their direct emissions exposure, according to a new study. The RFI Foundation’s “Identifying the Climate Risks Facing Malaysia's Financial System” new report identifies the climate-related financial risks facing Malaysia's banking system and capital markets as a result of the greenhouse gas (GHG) emissions that result from activities financed in the economy. The report presents a detailed top-down quantitative analysis to understand the sources from bank financing and capital markets of financing for the GHG emitted by both direct producers and households, according to Blake Goud, CEO of the RFI Foundation. The study aims to show an estimate of how to allocate GHG emissions to the sources of financing behind it that would be affected as the costs of those emissions become internalized. Goud explained that by raising awareness of the various climate risks in the financial system, the study can help financial institutions, including Islamic banks, to improve their ability to address material ESG issues.

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